Tax grab scares superyachts off

By MATHEW DEARNALEY

Eager tax collectors are being blamed for driving America's Cup spectator craft away from New Zealand for expensive refits in Australia, prompting an urgent Government review.

One big Auckland marine refitter, Babcock New Zealand, confirmed last night that its Devonport yard had lost a $1 million superyacht contract to Australia because of more lenient income taxes there.

Boating Industries Association chief executive Peter Busfield said he was unaware of any other countries whose tax collectors were pursuing visiting crews, but was pleased Government ministers had asked officials to review the issue.

He knew of at least two, and possibly three, America's Cup spectator craft which had already left New Zealand for refits in Australia to avoid tax demands here.

Owners of other superyachts had indicated they would come here for refits before the Louis Vuitton series, which starts in October to pick a challenger for the America's Cup contest next February, only if tax collectors were kept at bay.

The departures were starting to confirm fears raised at the beginning of the year by the marine industry that it stood to lose a potential spinoff of more than $100 million from the two regattas.

Tax collectors refrained from pursuing foreign crews when New Zealand defended the America's Cup in 2000, but the Inland Revenue Department set up a special project team to advise on tax liabilities for the next event.

The department said in January that it stood to gain "several million" dollars in income taxes.

Mr Busfield cited the case of a luxury boat-owner who paid about $30,000 for Teflon to be fitted to every door handle on board, after Kiwi ingenuity figured out a way to stop the handles squeaking.

The vessel was not here for a big refit, but he said the solution to the squeaky handles would inevitably have led to more work had the boat not been driven away.

"It is only by them being here that we get the business," Mr Busfield said.

But he was encouraged by discussions held with America's Cup Minister Trevor Mallard and Finance Minister Michael Cullen to convincee them that New Zealand would be in line for far more revenue in the long run if it waived income tax.

Superyachts here for the 2000 America's Cup are estimated to have generated $180 million in business.

Foreign vessels have to be in New Zealand for 183 days before their crews are liable for tax.

But Mr Busfield said refits often lasted longer than that, and it was the international perception rather than the reality of the issue that caused the most damage.

"The damage has been done because the publicity is out there that New Zealand has PAYE tax."

Babcock chief executive Mike Franklin, the Marine Export Group chairman, said that he was very disappointed at losing a $1 million contract, but was comforted by news that the tax issue was being investigated "at the very highest level ... with a view to levelling the playing field".

A spokeswoman for Dr Cullen said Inland Revenue and Treasury were investigating overseas tax practices in considering whether to exempt visiting crews from income tax.

nzherald.co.nz/marine